Bonds Add to Losses Following Final Poor Auction

U.S. Treasuries fell further late Thursday following another poorly received auction which, like Wednesday’s 10-year sale, saw weak overall demand and foreign participation rates. The sell-off took long bonds, 10- and five-year notes to mid-January high yield/low price levels (on a closing basis).

The 30-year was sold to trade 2.9305% versus 2.895% ahead of the auction while the 10-year dropped to 2.127% from 2.09%. The five-year hit a 1.539% low from 1.50% ahead of the auction results while the two-year outperformed, dipping to 0.91% from 0.89%.

The $15 billion 30-year bond sale was awarded 2.902%, tailing slightly from 2.889% reported at the deadline as bidders demanded a higher yield. That compares to 2.470% in October. Overall demand saw a 2.11 bid-to-cover ratio versus 2.44 last month and an average 2.32. That marked the weakest since February. Indirect bidders, the proxy for official foreign interest, took just 54.5%, missing 65.4% previously and an average 61.9% and marking the lowest since August 2015. Direct bidders were awarded a good 12.5%, however, twice last month’s 6.1%, while primary dealers, those banks required to bid at auction, were left with 33.1% versus 28.5%.